unit three Flashcards
what is absolute advantage
When an economy can produce a greater
total of goods with the same quantity of inputs, they should specialise in the production of this good or service
eg uk and finance
what is comparative advantage
This is when a country has an advantage in all products or services. Countries should still specialise in what ever has the least opportunity cost
what are some of the top uk exports
- Cars
- oil and gas
- food/drink
- technology
what are some of the top uk imports
- Cars
- Oil and gas
- pharmaceuticals
- Spirits (whisky)
what are the pros and cons of global trade
pros
- Stimulates economic growth
- increases competition - high quality goods -increases employment
- more variety of goods and services
- free trade allows for cheaper goods as there are no trade barriers
cons
- - negitive environmental impact
- decreases local employment
what are the pros and cons of globalisation
why do some contries have comparative advantage
- natural resources - oil and gas, timber
- Climate advantages - food production
- Skilled workforce - UK finance
what is a trade barrier
trade barriers are ways which trade between two
countries may be restricted. This is normally due to measures to reduce the number of imports into a country
what are the types of trade barriers
tariff- a tax or duty on an import to make it more
expensive
quota - a physical restriction on the number of goods entering a country
embargo - a complete ban on trade with a country or a specific product
Subsidies - when the gov gives money to a company to help them reduce the cost a production -cheaper goods
favouring - government may choose domestic businesses when awarding contracts for public sector project
what are the pros and cons of trade barriers
PROS
- to protect jobs
- to protect infant industries
- to prevent dumping
- for political reasons. eg russia -war
- health and safety reasons
CONS
- restricts consumer choice
- obstructs free trade
why may multinationals locate in the UK
- high education rates - skilled workers
- political stability
- english speaking - language of business
- good infrastructure
why may UK multinationals locate elsewhere in the world
- lower wages
- lower tax rates
- abundance of cheap land
- government subsidies or grants
- Less likely to have powerful trade unions
- large population
what are the pros and cons of becoming a multinational for a firm
pros
- increased market -> increased sales
- take advantage of economies of scale
- Cheaper staff
- grants from countries government
- becomes larger-safety from takeovers
- spreads risks between countries
cons
- Legislation in each country -expensive
- cultural differences - includes working hours (spain) etc
- Languages - costs of translators
what are the pros and cons of multinationals
PROS
- creates jobs
- increases tax revenue for government
- increases the number of skilled workers through training
CONS
- too much influence on the gov
- profits could return to the home country of the maltinational
- footloose in nature
• uses up natural resources
- Senior jobs may not be given to national people
what is the definition of an exchange rate
the exchange rate is the rate at which one currency trades against another on the foreign exchange market
